All Forum Posts by: Oliver Trojahn

Small local banks can typically provide 100% HELOC's on primary residences. I have two.

I use a commercial lender for 80% loan to value for business line of credit on rental properties.  This is obtained from portfolio lenders.

Also, you should tell them you plan to pay off debt with your HELOC not use for a downpayment.

Rent it.   Buy and Hold is the way to go

Between two and four single family homes depending on price and location:)

It is on owner occupant only.  I called all local smaller banks to see who offered it.  Usually, it is a credit union.

I have used the following all with success:

• Credit Card Balance Transfers to fund down-payments (If you have enough available  credit and can pay this back in a years time this is an incredible method.  You can actually write off the balance transfer fee against your income.).
• HELOC's. I have two on personal residences that I have moved out of. Both HELOC's are up to 100% value which can only be done on owner occ. Always get a HELOC before moving out of your personal and making it a rental.
• Portfolio Loans, 20 year amort, with a Business Line of Credit for acquisitions. Relatively new to this but will be able to acquire more this route and not effect my personal credit.  We are moving three conventional houses into this to see what it is like.
• Partnerships.

Flipping is for Rookie investors.

Passive rental income is for true wealth and freedom

I will run into this problem shortly.  I have a portfolio lender that can do 7/1 ARMS, 30 yr amortization, @ 3-4%.  They run 1% lower than conventional.  They will allow me to go above 10 mortgages.  I am also convincing them to let me into these houses with 10-15%.

Keep you posted.

This question is easy in my opinion.  If you invest in rental real estate, "all cash",  your returns will be diminished.  You can get similar gains in the stock market or being a money lender and do nothing.   Rental real estate takes hard work.  You should be paid for that.

Real estate is about leverage and making your cash on cash return 50% to infinite.  This comes with debt.

Honestly, you can make 8-10% in the corporate bond market any day of the week and do nothing.---this is what buying real estate with cash will give you. (real estate does have the upside of depreciation, appreciation, built in equity etc. but I dont think that is enough)

You need leverage to make 50-infinite% returns.

I am in the mindset of never paying off your rentals early until you have enough of them to provide enough income to live on.  I wouldn't want to give up cash for more rentals or the interest deduct each year on all my rentals.  If you keep loans on all your properties you will still have 20% equity in each property theoretically.  

You need to continue to buy rentals to a point your comfortable with.  Paying off the rentals you also lose possible appreciation and depreciation spread over additional rentals you could require if you didn't pay off the mortgages.  With conventional financing in the mid 4's for rental properties I don't see any reason to pay them off.  It depends on your financing too.  Since they are pretty cheap houses it sounds like you may be using a portfolio lender with higher rates.

Leverage is the biggest perk in real estate investing which makes the returns much better.  Real estate is a lot less attractive without it. There are many other investments that will take zero of your time that will give you similar gains to paying all cash for a rental house.

Good luck.

I am turning my current residence into a rental that only meets the 1% rule because I just bought my neighbors house (before is hit MLS) which will also only meet the 1% rule. Both houses are 200k houses that will rent for $2,100, locked in 3.1% and 3.8% 30 yr. owner occ rates.

I paid 20% below market for both. 

Higher rents and lower mortgage rates make the 2% rule useless on properties above 50-100k.  On my cheaper rentals i can usually hit 1.3% to 1.5% those rents are around 1,000 a month using 30 yr conventional financing.

I think my 200k houses may have the best cash flow yet after reviewing the numbers.  With very high upside.

I think the 2% is a very good first indicator on apartment complexes as those rents are cheap.  It is very important to meet the 2% rule when rent drops below about 700 a month.